(Feb-03) The dollar surged while equity markets and digital currencies plunged after US President Donald Trump announced significant tariffs on imports from China, Canada, and Mexico. This move, the most extensive act of protectionism by a US president in nearly a century, is expected to have widespread effects on inflation, geopolitics, and economic growth. The tariffs, affecting trade worth about $1.3 trillion, will raise the average US tariff rate significantly and could reduce US GDP by 1.2% while increasing core PCE by 0.7%. Mexico and Canada, heavily reliant on exports to the US, face severe economic risks, while China’s impact is more manageable. All three countries have vowed to retaliate, potentially expanding beyond tariffs. The overall impact on the US economy is uncertain, but significant disruptions are anticipated.
(Feb-04) Currency markets are reacting strongly to President Trump’s tariff measures. The US dollar rebounded after China imposed retaliatory tariffs, signaling serious intent and raising concerns about further US counter-retaliations. This situation suggests higher US rates, increased FX volatility, and a stronger US dollar in the long term.
(Feb-04) Oil markets are under pressure as the US and China engage in a trade conflict, risking year-to-date gains for Brent and WTI. The temporary halt on trade escalation with Mexico and Canada negatively impacted crude by removing a levy on Canadian crude flows. The US-China tariffs could slow global growth, reduce energy consumption, and decrease risk appetite. Additionally, OPEC+ is eager to increase oil supply, adding further headwinds for crude prices.
(Feb-04) EUR/JPY is expected to decline further due to geopolitical risks and a favorable rate gap for the yen. Beijing’s tariff retaliation supports haven currencies like the yen and pressures the euro, exacerbated by Trump’s tariff threats against the EU.
(Feb-04) China has announced an investigation into Google for alleged antitrust violations and imposed new tariffs on various US products in response to President Donald Trump’s 10% tariff on Chinese goods. The new Chinese tariffs include 15% on coal and liquefied natural gas, and 10% on oil and agricultural equipment from the US. China criticized the US’s unilateral tariffs as a violation of World Trade Organization rules and harmful to economic cooperation
(Feb-03) The upcoming week is significant, starting with market reactions to President Trump’s tariffs, SA State of the Nation Address (SONA) on Thur, and ending with the US payrolls report. Trump announced cutting off future funding to South Africa, accusing it of land confiscation and poor treatment of certain classes. This follows SA’s new bill allowing “nil compensation” for expropriated property. The rand weakened due to Trump’s comments and local load-shedding concerns, with potential moves to 19.00 USDZAR. Despite this, positive fundamentals for the rand remain, supported by a record gold price (saw a new high of 2817 31-Jan). A break below the 18.60 level would indicate a potential easing, otherwise, ZAR remains under pressure.
(Feb-03) S. AFRICA CAN WITHHOLD MINERALS IF US WITHHOLDS FUNDS: MANTASHE
(Feb-04) Eskom has officially suspended load-shedding as of February 2, 2025, after resolving recent breakdowns. Electricity Minister Dr. Kgosientsho Ramokgopha announced the suspension and praised Eskom’s teams for their efforts. He apologized for the disruptions and assured residents of continued efforts to provide reliable electricity.
By Thuto Mukena - Institutional Sales Specialist (Jan-31)
It’s been a data-packed, headline-heavy week, with risk conditions swinging in all directions. The ZAR has had a choppy week, yesterday’s 25bps SARB rate cut sent the local unit in the red territory, reversing some of its prior session’s gains, leaving the pair to close the week at R18.5688/$.On the vol front, the 1-week volatility risk premium has compressed deeper into negative territory, highlighting that the market mispriced and underpriced this week’s risk conditions. USD/ZAR Implied vols also hover lower as we brace for an exit for this week , the 1W USD/ZAR implied vol tenor no longer trading at a premium over 1M. The tenor closed yesterday’s session 1.87 vol p.p below opening levels.
EM pairs saw mixed spot performance on the day, while most G10 currencies were offered, closing the session weaker. On the implied vol front, G10 implied vols largely tracked spot moves, with USD/CAD and USD/JPY 1-week implied vols standing out as the exceptions, firming by 145bps and 64bps from the open. Main event on the day was the ECB rate decision, EUR/USD 1-week implied vol dropped by 62bps, declining alongside spot in the aftermath of the ECB’s 25bps rate cut, which set the deposit rate at 2.75%. Key take aways from the press conference is that the central bank maintained a data-dependent stance on future cuts, emphasizing that policy remains restrictive while also flagging concerns about growth risks in the region.
By sizwe Mfayela - Institutional Sales Specialist (Feb-03)
Economic data releases